Vantage Health & Life

Income protection insurance is a policy that pays out if you're unable to work because of injury or illness. It pays out regularly to replace a portion of your income.

Formerly known as permanent health insurance, it's there to help you pay your household bills, mortgage payments, credit card bills and everyday costs that you can no longer cover, by making sure you have a regular income over the long term.

Critical illness cover pays out a lump sum if you're diagnosed with one of the 'critical illnesses' it covers. Most will typically cover life-threatening conditions such as a heart attack, stroke and cancer.

Relevant Life Plan
Tax efficient life insurance plan for directors and employees that is written in trust and has multiple benefits over a personal life insurance policy.

Tax Deductible Life Insurance for Employees and Directors

Relevant Life Plans offer an exceptionally tax-efficient life insurance solution that businesses can extend to their employees, including company directors. This is a single-life, death-in-service benefit that is held in trust and provided by the business, offering protection similar to a standard life insurance policy. However, the tax advantages of this product are considerable.


For businesses, the monthly premiums can be eligible for up to 25% in corporate tax relief and do not incur any employer National Insurance contributions. Additionally, employees do not face a benefit-in-kind charge (P11D), allowing them to avoid paying income tax at their highest rate. Company directors, in particular, can achieve substantial savings—often as much as 50%—by having their life insurance covered through this plan by the business.


Depending on the tax rates applicable to an individual and their company, and even after maximizing tax efficiency through dividends, some individuals may see savings of up to 66% compared to financing life insurance from their post-tax earnings.

For other companies, these premiums are generally considered an allowable business expense, with no associated National Insurance contributions or benefit-in-kind charges for either the company or the employee.


Relevant Life Plans were introduced in 2006 following the pension simplification reforms, providing a tax-efficient means for business owners to offer life cover to their employees and directors. These plans are particularly valuable for employers who are unable to offer group scheme coverage, as they serve as an excellent tool for attracting and retaining top talent. For company directors, the generous coverage available makes this a particularly attractive option.

Executive Income Protection
Safeguard company directors by ensuring their income is protected against the financial impact of being unable to work due to illness or injury.

Providing Your Business with Consistent Income When an Employee or Director is Unwell

Executive Income Protection offers vital support to small businesses by safeguarding them from the financial strain that arises when an employee or director falls ill or is injured and unable to work.


This plan is structured to provide a monthly benefit to the business in the event of a valid claim. These funds can be used to cover the ongoing sick pay of the employee or director, ensuring they can meet their financial obligations without having to rely solely on their savings or state benefits.


The coverage can extend to up to 80% of the employee’s salary, including dividends and P11D benefits. Additional coverage options are available at an extra cost to include employer pension contributions and National Insurance (NI) contributions. Company directors can take advantage of this valuable benefit without facing P11D benefit-in-kind tax.




What Would You Do If Your Income Suddenly Stopped?

Executive Income Protection is specifically designed for small and medium-sized businesses to help cover the cost of providing sick pay to key employees, including controlling directors.


The policy is established and funded by the employer (who owns the policy) for the benefit of the employee (the insured person). Should the insured employee become ill or injured and unable to work, the monthly benefit from a claim is paid to the employer (policy owner), who then passes it on to the employee through PAYE to support their ongoing sick pay. The employer can also use the policy to cover additional expenses, such as employer’s National Insurance and pension contributions.

Key Person Insurance
Financial support to your business if a crucial employee passes away or becomes seriously ill. The funds can be used to offset profit losses, cover recruitment expenses, hire replacement staff, or repay loans.

Financial Protection for Your Business if a Key Individual Passes Away or Becomes Seriously Ill

Often referred to as key person insurance, this is a life insurance or critical illness policy that a business secures on the life of an owner, senior executive, or other crucial employees who are vital to the company’s operations. The business serves as the policy’s beneficiary and is responsible for paying the premiums.




Is Key Person Insurance Tax-Deductible?

Key Person Insurance is a policy that a company or business takes out on an individual within the organisation. As the policy owner, the business is the beneficiary of any payout in the event of a claim. The business covers the premium payments, which are generally tax-deductible, provided that the purpose of the coverage, the policy term, and the benefit amount meet specific criteria, and the insured individual is an employee.




How Can Key Person Insurance Benefit Your Business?

Key Person Insurance safeguards your business against the loss of a crucial employee due to death or critical illness. It provides a cash lump sum to the business, helping to manage the disruption caused by the employee’s absence. This insurance can assist with the following:




Key Features of Key Person Insurance

Recruitment Costs: Replacing a vital employee can be costly. The Society for Human Resource Management estimates that the cost of replacing an employee can reach 50% to 60% of their annual salary. Key Person Insurance can provide the necessary funds to cover recruitment expenses, ensuring your business can find a suitable replacement without financial strain.

Protecting Against Lost Profits: One of the primary benefits of Key Person Insurance is the financial protection it offers against potential profit losses due to the death or critical illness of a key employee. The payout can help stabilize the business during this challenging time. Additionally, since the insurance serves the exclusive benefit of the business, the premiums are typically eligible for tax relief.

Repaying Outstanding Loans: If a key employee, director, or owner becomes seriously ill or passes away, your business might struggle to meet financial obligations such as loan repayments. Key Person Insurance can provide the necessary capital to keep up with these payments, helping to maintain the business’s financial stability even in the absence of a critical team member.

Raising Finance for Growth: The absence of a key person can shake lender confidence and make it more difficult for your business to secure financing for growth. Key Person Insurance can act as a safeguard, giving lenders reassurance that the business has a financial safety net in place, thereby improving your chances of raising capital when needed.




How Is Key Person Insurance Taxed by HMRC?

The taxation of Key Person Insurance by HMRC is ultimately determined by the policy’s purpose and who benefits from it. The rules can be complex and may seem stringent, as they depend on how the business intends to utilize the policy proceeds.


Typically, the proceeds received by the business are tax-free, but they are considered a trading receipt, meaning that any profits at the end of the business’s accounting period may be subject to tax.


The premiums for the policy are tax-deductible, provided the coverage purpose and the individual being insured meet specific criteria.


However, if the proceeds are intended to repay a loan, the premiums will not be tax-deductible since they are not used solely for the business's benefit but also serve the lender. That said, the benefit itself will be tax-free, as it is treated as a capital receipt used to repay a capital sum.


If there is a concern about taxation on the proceeds, it is relatively straightforward to "gross up" the benefit amount. Grossing up involves adding an additional amount to the insurance benefit to cover any income taxes that may be due on the payout. This means insuring yourself for a larger sum than initially required, ensuring that you receive the intended payout amount after taxes.




HMRC, Key Person Insurance & Taxation

The taxation of Key Person Insurance by HMRC is complex, largely governed by principles established over seventy years ago, commonly referred to as the Anderson Rules.


A key aspect of this taxation is the ‘wholly and exclusively test,’ which is one of the primary factors in determining whether you will need to pay tax on Key Person Insurance premiums.


This test evaluates whether the insurance payout will be used ‘wholly and exclusively for the purposes of the company’s trade,’ meaning solely for the benefit of the business. If this condition is met, the premiums are typically considered a tax-deductible business expense, reducing the company’s corporation tax liability.


If you have concerns or uncertainties about the taxation of both the benefits and premiums, or if you’re considering Key Person Insurance, please don’t hesitate to get in touch.

Business Loan Protection
Ensures the necessary funds and peace of mind to settle all business and corporate debts, including commercial mortgages, directors’ loans, and personal guarantees.

Protect Your Company's Financial Stability in Times of Uncertainty.

Many businesses borrow to invest in their operations or cover ongoing expenses. However, would your business be able to manage its loan repayments in the unfortunate event of a key employee's or owner's death or diagnosis of a critical or terminal illness?




What is Business Loan Protection?

Business Loan Protection is a life insurance product designed to assist your business in meeting obligations such as outstanding mortgages, loans, or commercial mortgages in the event of a key person's death or critical illness.


In the event you lose a business partner, you may want to repay outstanding business loans, some of which may have personal guarantees and are required to be repaid when someone dies.


Key individuals will usually include business owners, directors, or employees possessing specialized skills.




Why Business Loan Protection is Important

Business Loan Protection helps to safeguard your business by ensuring that a debt secured against business assets or your residence doesn't jeopardize your personal assets or family home.


Having Business Loan Protection in place provides assurance to all stakeholders in your business and your family. This protects relevant individuals and their families from financial difficulty, especially if the loan pledged security for a bank loan.


Banks typically require Loan Cover to be in place, often specifying that the policy is assigned to the bank to mitigate their exposure to risk.


The sudden death of an individual by the bank can severely restrict working capital, necessitating the immediate repayment of loans and other credit facilities.


As the Personal Loan guarantor, your company or family members can face difficulties if the event of their death must be settled before their estate can be released to their family.


Personal guarantees may further amplify this risk, potentially putting your family's home or assets at risk in the unfortunate event of your demise, your partner is unable to manage the debt, saving them in a vulnerable position.

Ownership Protection
Safeguard your business from the potentially severe financial impact of a shareholder's or partner's death, this product usually involves life insurance, with the option to include critical illness cover.

Safeguarding a Business When a Shareholder Dies

Ownership protection, known as either shareholder or partnership protection, is an arrangement of insurance and option agreements which protects surviving business owners on the death or serious illness of a fellow owner. This protection provides both necessary capital and rights to shares, ensuring surviving business owners can keep control while providing value to the deceased owner's family.




Do I Need Ownership Protection?

If a shareholder died, could you afford to purchase their share? If not, shareholder protection can help safeguard your business ownership.




How Does Shareholder Protection Work?

In the event of a business owner dying or being diagnosed with a terminal illness (life expectancy less than 12 months) or a specified critical illness, share protection arrangements provide a lump sum to the remaining business owners. This sum can be used to purchase the deceased partner, shareholding director, or member's interest in the business.




Cross Option Agreement

A cross-option agreement, also known as a double-option agreement:


Grants business owners options on their shares

Comes into force when a shareholder dies

Gives surviving owners the option to buy the deceased's shares

Gives the deceased's estate the option to sell shares to surviving owners

Is typically backed by an insurance policy

Allows for potential business property relief for IHT calculations




What Are The Tax Implications?

No income tax liability on death claim proceeds due to the qualifying nature of policies

Capital Gains Tax is not applicable on death proceeds

Critical illness or terminal illness claims may incur capital gains liability

No Inheritance Tax (IHT) at the outset or on additional premiums when all owners participate

No surrender Inheritance Tax on policy upon death

Inheritance Tax on share protection upon death exempt due to 100% business property relief




Setting Up Shareholder Protection

There are three main ways to set up a shareholder protection arrangement:

Life of Another

Own Life in Trust

Company Share Purchase


Each method has its own merits, affecting the treatment of premiums and proceeds differently.


We will assist you in recommending necessary cover, working with your accountants to accurately evaluate your business and determine the required coverage for all insured shareholders.